Have You Been Wondering if you Qualify for Refinancing?

If you identify as a homeowner or make monthly payments on your car then you may be aware of the option to refinance your loan. Refinancing your house or car loan simply means to finance your investment again on different loan terms, usually with a lower interest rate. This is a good idea for most homeowners when rates significantly lower than what they currently are. Depending on the loan term, choosing to refinance can save individuals hundreds of dollars per month. However, this loan option is not an to everyone. Have you been wondering if you quality for refinancing? Consider asking yourself these questions to see if you meet the criteria.

Do you have 20% stake in equity?

Lenders seek a high percentage invested into your equity, usually around 20%. To estimate your equity, divide the amount you are wanting to borrow by the value of your home. Take your amount and subtract 100 to find your equity percentage. If your percentage is around or over 20%, this increases your chances of refinancing.

Do you have a good credit score?

Aside from holding 20% equity stake, good credit score is another key factor lenders seek before the approval of the loan. The minimum most lenders require is a score of 600-650, while some lenders seek credit scores of 720 or above. If your credit score is low, focus on changes you can make to gradually increase the number. Your credit score comes from five different factors:

• Payment history
• Utilization
• Length of credit history
• New credit lines
• Type of credit you obtain

How much debt do you have?

Lenders study your monthly payments including mortgage, credit cards, and car loans that are relative to your income. Ensuring your payment history is correct with no missed payments will increase your approval of a refinance loan. Lenders seek ratios no higher than 38% when analyzing your debt-to-income.

If you are looking to reduce your monthly mortgage payment, refinancing your home is a great option! Upon going through the process you will be saving cash each month, allowing you to invest in other expenses.

Choice Properties understands your needs and desires when it comes to the home search. We are here to help you define what you want, seek the best property and move forward feeling educated and able to make good decisions throughout the process. You can trust us to help you navigate it with the best real estate agents working for you. Call us to get started on your dream home search today.

A refinance could cut the monthly mortgage payment but whether it is the right move or not depends on some factors. Learn more about some things to consider prior to refinancing a home mortgage that could save time and money.

Refinancing Costs Money

A free finance does not exist as there are closing costs associated with any closing no matter what house a person buys. Anywhere from 2 to 5 percent of the loan amount will be added on and need to be paid upfront. Some options can also include:

• Cover the closing costs using a no-closing cost refinance which can come with a slightly higher interest rate

• Look at closing costs and how those will be covered prior to calculating how long it will take to make monthly payments to repay the closing costs

• If the closing costs will only be covered in four years and the plan is to stay two years in a home, refinancing may not make sense

Savings

Refinancing makes sense when the interest rate on a mortgage is more than 100 basis points above current interest rates. There is no hard and fast rule on how much to save but costs should be recouped in two years or less. A 30-year fixed loan of $200,000 loan might see a rate of 4.83 percent in March 2011. The rate today may vary from that slightly. In six months past the two-year mark, it may take awhile to recoup costs if the loan is considered at a different rate in a different period of time. Doing homework on comparing refinance rates will save lots of time and money in the long run, which requires research on multiple lenders to come to a final conclusion.

Refi and PMI

Private mortgage insurance (PMI) on a loan on a home that has substantial equity could enable a person to cancel mortgage insurance. To do this, the following must be in place:

• Loan balance of 80 percent or less of home's appraised value

• New loan could replace the loan with PMI when appraised and cancel PMI obligations

Equity and Cash

A cash-out refinance lets a person take out a new mortgage for more than the amount owed on the current loan and pocket the difference - typically up to 80 percent of loan-to-value ratio. This may be a good move depending on where the money goes. If this money goes to put an addition on the home, this will increase the property value but come at a higher rate than non-cash-out-refinances. Discretionary spending like vacations or other spending may not be advisable as it does not put equity back into the home. One thing to keep in mind is that if a home's value may decrease in a certain neighborhood where values are going down, it may not be a good time to tap the equity. Weighing costs and benefits is part of the process and requires forward thinking to save money in the long run.

When looking to buy or sell a home in Logan County, Choice Properties Real Estate is the premier company with award winning agents available to assist you in the search. Contact us today to find out how we can help you.